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Regenerative Agriculture Value Proposition: Final report

December 2022

The purpose of this project was to define the value proposition for regenerative agriculture in a sheep and beef context for New Zealand, using a survey approach to compare the economic performance of conventional and regenerative farms. FARMAX modelling
provided insight into the drivers behind the physical performance by assessing feed harvested and livestock performance.

A total of 8 regenerative and conventional farm pairs (16 farms total) provided actual financial and performance data: three in Waikato, two in Northland, two in Taranaki, and one pair in Canterbury. Pairing criteria were based firstly on location (same region, in a similar climate), secondly on land class, and thirdly on having similar livestock policies.

The performance of each farm was influenced by a multitude of variables, and as such, the purpose was to identify major differences in economic performance that could be used to design more in-depth studies.

Verified annual accounts data were collected from the survey farms between 2017/18 and 2020/21. The data showed total gross revenue was $382/ha higher for conventional farms ($1473/ha) than regenerative farms ($1091/ha, P<0.05). Total farm expenses and individual expense items were highly variable. Earnings Before Interest, Tax, Rent and Management Wage (EBITRm) was $340/ha higher for conventional farms ($613/ha) than regenerative farms ($273/ha, P=0.050). This difference was driven by the higher revenue, as total farm expenditure was similar.When compared to conventional farmers, regenerative farmers placed a lower emphasis on profitability and more emphasis on the health of the pasture (e.g. nutrient content) and livestock, and land improvements. This is not surprising considering that these are core attributes of the regenerative farming philosophy.The challenge, however, is that the lower profitability of regenerative farming creates a barrier for adoption for conventional farmers, given they place a greater emphasis on profitability.It should be noted that regardless of the farm type, all farmers involved in the project sought to maintain a financially viable business, to maintain healthy soils, pastures, and livestock, and to improve the land. It was just the relative importance of these factors that differed between the two farm types.There is significant interest in regenerative agriculture by the consumer and large multinational companies such as Danone and Nestle. This project indicates that to provide a value proposition for regenerative agriculture at the farm gate, premium pricing is needed to offset the reduction in production to encourage greater uptake among conventional farmers.

Rural Professionals Fund final report, December 2022

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